Tag Archives: patent licensing

Philanthropist & patent licensing pioneer, Eugene Lang, dead at 98

One of America’s most successful and charitable patent licensing strategists passed away last week. 

Eugene M. Lang, describe as “an American folk hero” for his generous philanthropy, grew up on Manhattan’s East 83rd Street in a $12 per month railroad flat.

He went on to donate more than $150 million to charities and institutions during his lifetime for educational causes, including the I Have a Dream Foundation, which he established in 1981; the Eugene Lang College, part of the New School in Manhattan; the Eugene M. Lang Center for Entrepreneurship at Columbia University School of Business; and Swarthmore College, which he entered at 15 on a scholarship.

Much of Lang’s fortune was derived from the Refac Technology Development Corporation, it was reported in his obituary, a public company he founded in 1952 that specialized in the licensing of patents and financing high-tech ventures.

Thousands of Suits

“REFAC held patents relating to LCDs, ATMs, credit card verification systems, bar code scanners, VCRs, cassette players, camcorders, electronic keyboards, and spreadsheets,” reports Wikipedia, “and filed thousands of lawsuits against other corporations to secure licensing fees or out-of-court settlements, a business practice of some very large corporations such as Microsoft and Google as well as large startups such as Intellectual Ventures, and sometimes criticized as patent trolling.

Some considered Refac International Ltd., known for suing thousands of big and small companies to protect its patents, the model on which other non-practicing entities (NPEs) were based. In 1990, the company was chastised by a federal appeals court in Washington after losing a major lawsuit it filed against 118 Southern California companies selling products with liquid crystal displays.

The New York Times reported that Refac — the name stands for resources and facilities — had made much of its money “by aggressively filing patent infringement suits against companies like IBM and Eastman Kodak and retailers like R.H. Macy and Radio Shack on behalf of inventors of a wide range of products: liquid crystal displays, automated teller machines, bar-code warning systems and spreadsheet software.”

In a letter to The Times [valuable for its historical and factual content], Mr. Lang called the article “grossly distorted” and pointed out that most of the clients represented in lawsuits had sought out Refac after offering licenses to the corporations for their inventions and being turned down.

He illustrated his argument by citing the inventor of the laser who had tried to get industry to recognize his role and succeeded only after Refac won validation of his patents in the courts.

“For Refac, the drama of litigation began in 1975 when Gordon Gould, after battling industry opposition since 1959, asked us to represent his claims as inventor of the laser,” wrote Lang.

“Concluding that Mr. Gould’s claims had genuine merit, Refac, against all odds, accepted the challenge. It took until 1987 and some $4 million, but the courts finally validated every patent of Mr. Gould’s. Despite vituperative reactions from the laser industry – analogous to quotations cited in your article – claims that in 1975 might have been labeled ”all but worthless” now generate annual royalties in excess of $12 million.

Impulsive Gesture

A self-made businessman who flew coach class and traveled on subways and buses, Lang is best remembered for his impulsive gesture in June 1981, when he was invited to deliver the commencement address to 61 sixth graders at Public School 121 on East 103rd Street in Spanish Harlem. He had attended P.S. 121 as a boy 50 years earlier.

He made himself personally available to the students, counseling them when they faced obstacles such as teen pregnancy, addiction, and delinquency. He cheered them at their graduations and helped arrange for jobs. When a student was incarcerated at Sing Sing, he helped him pursue college course work from prison.

In addition to his daughter, Jane Lang, a Washington lawyer and community activist, Lang is survived by two sons, David and the film and stage actor Stephen Lang (Avatar, Conan the Barbarian, Gettysburg); a sister, Barbara Lang; eight grandchildren; and eight great-grandchildren.

In 1996, President Bill Clinton awarded Mr. Lang the Presidential Medal of Freedom.

For more information about the Eugene M. Lang Foundation, go here.

Image source: thenewschoolhistory.org; newsworks.org

PTAB fairness data is misleading, say more patent holders

Not all patent owners agree the Patent Trial and Appeal Board (PTAB) is a fairer forum for vetting patent quality today.

While some believe that the United States Patent and Trademark Office (USPTO) board is no longer the “death squad” that it was described as by the former Chief Judge of the Court of Appeals, most patents subject to multiple inter partes reviews are, with an uncanny frequency, either invalidated or severely weakened. Few, emerge as clear winners.

The USPTO established the PTAB, an administrative law body, as part of the America Invents Act in 2012 to eliminate issued patents that should not have been granted because prior art way overlooked. IPRs are said to be a patent office “second look,” but while patent office re-examinations (an earlier review process superseded by IPRs) eliminated many patents that should not have seen the light of day, they also strengthened some, making them easier to license. To date, IPRs effectively have been a one-way street, eliminating many patents that should not have been issued but ineffective at identifying good ones.

An article that appeared last week, “How IPR Gang Tackling Distorts PTAB Statistics,” takes the recently reported data to task for misleading about the ultimate effect of multiple IPR filings on a single patent.

“If you use the PTAB published statistics, they’ll tell you that the institution rate was 50% – because only 1 of 2 petitions was granted. That’s true, as far as it goes. But from the patent owner’s perspective, they used to have 10 claims, and now they have 0.  That’s a 100% kill rate!”

“Assume 10 petitions and one institution,” wrote Peter Harter in IP Watchdog. “A 10% institution rate seems terribly biased towards [in favor of] the patent owner. But if all 10 claims get killed, that’s still a 100% kill rate – pretty good for challengers. When both sides think the deck is egregiously stacked against them, it’s easy to see why there’s no middle ground for compromise and improvement. And the way the PTAB is reporting statistics is to blame.”

An article that appeared recently in Law 360, “Inter Partes Reviews Becoming Friendlier to Patent Owners,” argues that holders whose patents are subjected to IPRs today have a better chance of survival than in the past.

“The PTAB also now institutes inter partes reviews less frequently,” writes Law 360. “Looking at all institution decisions made by the PTAB, the board decided to institute trials more than 85 percent of the time in the first year after inter partes reviews became available (2013) according to data from the U.S. Patent and Trademark Office, but only 68 percent of the time in its 2016 fiscal year.”

Statistically Valid

The decline in the institution rate may be statistically valid, but some patent holders argue that it does not tell the whole story. The statistics do not explain that some of the worst, most easily invalidated patents came before the PTAB in the first year of its existence, so the institution rate was destined to go down as it became clearer the weakest patents had been terminated.

Results from a November-December 2016 Bloomberg Law and AIPLA research study asserts that “progress has been made in patent owner attitudes towards IPRs.” However, it really depends on which patent owners you ask: those that have large portfolios that they rarely enforce or those with a small number of quality patents that they wish to license.

Brad D. Pendersen, former chair of AIPLA’s IPR Committee and co-author Bloomberg Law-AIPLA’s Patents After the AIA: Evolving Law and Practice (2016) believes that there is an opportunity for patent holders subject to IPRs to strengthen their patents, despite evidence to the contrary.

“Given the potential gold-plated downstream advantages (in litigation and/or settlement) of surviving an IPR (either at the Decision or Institute stage, at the Final Written Decision stage), and given that one-third of patents survive at the Decision to Institute Stage, it is surprising – but not completely unexpected – that some portion of patent owners are starting to look more favorably on the IPR process.”

It is not clear that most patent owners who license would agree with the “gold-plated” reasoning. If it were true, there would be even fewer patent suits and more owners seeking IPRs of good patents. In fact, it is a bit of a mystery what happens to patents that pass PTAB muster. A significant number appears to move on to district court litigation, and there is little data analyzing if they have greater value or fare any better licensing than patents that are less successful running the IPR gauntlet.

Leading IPR Target

Finjan is an example of an IP holder that engages in licensing whose patents are frequently subject to IPRs. The company has fared surprising well in defending itself at the PTAB, but that success does not seem to have translated into significant shareholder success for the cybersecurity company which also frequently out-licenses its patents.

On March 15, 16 and 17, as reported in The Patent Investor, Finjan won three more IPR rulings, involving Palo Alto Networks. Shares of Finjan (FNJN) currently sell at just $1.54. The company has a micro market capitalization of $35M, $18M on 2016 revenues. Its shares are up significantly over 12 months vs. for the S&P 500 Index, but the company, which lost $12.6M in 2015, showed its first profit in 2016, $350K or .02 per share. Finjan has executed a difficult IP strategy. If successful IPRs have gold-plated its patents, the value has yet to shine through.

Finjan was the fourth most IPR’d patent holder in 2016 and the third most in 2015. It is the most successful company in successfully defending against IPR petitions. Of 47 total IPRs against Finjan patents to date, 32 have been denied institution.

With that track record at the PTAB, one would think Finjan would have a field day licensing its patents, but the IPRs continue to come, and it still must win hard-fought victories in district court litigation. In September, a California jury found that cybersecurity firm Sophos infringed all eight patents asserted in a lawsuit brought by Finjan over software that identifies new computer viruses, awarding the company $15 million in damages.

“We have a portfolio of patents that has been proven durable in light of the increasing number of administrative pathways to challenge validity largely due to two factors,” says Finjan CEO, Phil Hartstein.  “First, our patents were developed jointly and alongside product development of technology that was disruptive to a market.  Second, we do not deviate from the intrinsic record of the assets themselves and vigorously defend our patent rights on the merits.”

Coordinated Challenges

Editor and patent attorney Gene Quinn of IP Watchdog believes that Finjan and other businesses that attempt to out-license their patents are frequently subject to repeated, coordinated attacks.

“At least several patent owners, including Finjan, are routinely subject to serial, harassing IPR challenges,” writes Quinn. “The Patent Office doing something about harassing IPR challenges is long overdue. If the Director is not going to exercise the discretion vested in that Office by the America Invents Act (AIA) hopefully more panels of the Board will take it upon themselves to do just that.

“Patent owner harassment needs to stop. Patent owners shouldn’t have to be subjected to many dozens of IPR challenges before someone recognizes there is coordinated harassment – perhaps even collusion – against certain patent owners who have the audacity to want to be paid for blatant, ongoing, willful infringement.”

23 IPRs Filed on a Single Patent

Zond makes plasma generators, the kind used in manufacturing semiconductors. Pulsed DC plasma generators for magnetron discharge were first introduced in the late 1990s to reduce arcing during for the purpose of improving the quality of thin-film materials. A big breakthrough came in September 2002, when Zond applied for what it describes as a “revolutionary” pulsed technology approach.

Zond is a Massachusetts-based company that wholly owns Zpulser LLC, which commercializes its patent technology by making and selling high-power plasma generators. The patent at issue relates to methods for generating magnetically enhanced plasma.

Over the last three years, Zond’s patents have challenged an average of 12.5 times in IPRs and as many as 23 times.  The patent research firm, Patexia, writes that it is difficult for holders of good patents to survive multiple IPR challenges. In the case of Zond, it has made licensing pretty much impossible.

A study last year, reported in Law 360, showed that Zond’s patents have been challenged in AIA reviews more than those of any other patent owner, including largest patent licensing company, Intellectual Ventures, which owns more than 70,000 patents and took second place on the list.

Zond’s large number of infringement suits, reports Law 360, spurred many companies to band together to challenge the patents in AIA reviews. In addition to Fujitsu and Gillette, petitioners have included Toshiba Corp., Advanced Micro Devices Inc. and Taiwan Semiconductor Manufacturing Co. Ltd.

Were potential licensees and defendants in patent suits lining up against Zond’s patents because they were bad and its case without merit, or did they want to destroy some potentially good patents that would have cost them to license?

For IPRs the devil certainly is in the details, as Patexia’s Pedram Sameni points out in a case study, “Can Patents Survive Multiple IPR Challenges?”

“Some have been suggesting that solely relying on the denial rates reported by the patent office is not enough to conclude that patents are surviving the IPR challenge,” writes Sameni. “Many have called PTAB, the patent death squad. Our study shows that in some cases, patents are challenged many times.

“The reality is that it only takes one successful IPR to completely kill all the claims of one patent. Therefore, the case-level status is not the best indication of PTAB performance and patent survival rate. While as IPR’s Final Written Decision usually means that some of the claims were invalidated, it does not necessarily mean that all claims were canceled.”

Not the Full Story

If claims still exist, they could be threats. And potential licensees/defendants will go to lengths to “kill” a patent to avoid paying a license or being dragged into court, including teaming on multiple petitions. Repeat IPRs are an efficient way to make a potential infringement suit or royalty payment disappear for multiple parties.

“The statistics that show that the PTAB is becoming fairer for patent holders do not tell the full story,” a prominent NPE told IP CloseUp. “IPRs are frequently unfair fights between several, well-funded petitioners and a single patent owner who has to run the gauntlet, repeatedly.  Surviving an IPR doesn’t mean anything if subsequent challenges can be filed at any time, especially in coordinated fashion.”

Once a patent is challenged multiple times with different prior arts, it is highly unlikely that any of its claims will survive – no matter how good it is.

“The PTAB may not be a death squad, but challenged patents are put in a kind of headlock that can render them useless. Where are the patents that emerge from IPRs generally intact or whose petitions against them for review are not instituted? They should be eminently licensable, but they are nowhere to be found. The ‘normalization’ statistics that are being cited to show that the PTAB is becoming a fairer forum for patent holders are highly misleading.”

Lack of Uniformity

Another patent licensing business, one whose petitioned patents have survived multiple IPRs, still believes that the lack of uniformity among the many PTAB panels and administrative law judges is a major factor in the continued unfairness that has effectively destroyed patent licensing for many companies and independent inventors.

“It’s difficult to predict how the PTAB will rule,” says the executive, a lawyer. “The first year or two that patents were subjected to IPRs there was a lot of low-hanging – really, rotting –  fruit. Those petitions were almost universally instituted, and many bad patents were appropriately eliminated.”

“But anyone can file and IPR and they can keep filing them. Reliable patents don’t seem to emerge from the process, only ‘bad’ ones, which are eventually neutralized. Few patent holders have the time or money to repeatedly defend themselves in IPRs. This has made otherwise licensable patents pretty much worthless and daily infringement, at least to some, an acceptable way of doing business.”

Image source: patentlyO.com; patentacademyonline.com; 

IP licensing leader Tessera renamed Xperi Corp in rebranding push

One of the leading public IP licensing companies, or PIPCOs, Tessera Holding Corporation, has changed its name to Xperi Corporation, an indication that it has altered its direction. 

The renaming is an apparent effort to place more emphasis on new lines of business outside of patent licensing after acquiring DTS, as well as facilitate the company’s lagging stock price. Tessera reported disappointing results that surprised Wall Street in late February.

The name change was announced on February 22. On February 23 Tessera/Xperi reported that it had missed its Q4 earnings by $.25 per share.

Stalling Stalwart?

Tessera (TSRA), InterDigital (IDCC) and Rambus (RMBS) have been the lead players among PIPCOs, with industry-leading market values of $2.2B, $2.9B and $1.4B respectively.

Tessera/Xperi (58ae87c857fd3-imageXPER) reported fourth-quarter adjusted earnings of 32 cents per share, missing the Zacks Consensus Estimate by 25 cents. Also, revenues of $70 million missed the consensus mark.

Following the weak earnings release, share of the leading chip packaging and interconnect solutions provider slipped more than 13% in the after-hours trading. Over the past year, shares of Tessera Technologies underperformed the Zacks categorized Electronics Manufacturing Machinery industry. While the industry gained 27.66%, the stock generated a loss of 2.13%.

TSRA was 44.65 on February 22 with approximately $2.2B market cap. XPER is 35.55 on March 2 with a $1.7B valuation. A 2015 article the investment weekly Barron’s questioned how Tessera accounted for “recurring” revenues, which the publication said were really patent litigation settlements paid out over time, not royalty income.

In May 2016 Vringo changed its name to Form Holdings (FH).

“2016 was a transformational year with the combination of Tessera and DTS, which today we are excited to have rebranded as Xperi, reflecting our new vision of bringing together digital and physical experiences in smart, connected and personalized ways,” said Tom Lacey, Chief Executive Officer.

Acquisition of an Acquisition

On September 20 Tessera Holding announced its $850 million deal to acquire DTS, a premier audio solutions provider for mobile, logo2014_tagstack-sitehead_232x92_2xhome, and automotive markets. Only a year or so before that DTS entered into an agreement to acquire HD Radio developer iBiquity Digital Corp.

Tessera/Xperi says that its technologies and intellectual property are deployed in areas such as premium audio, computational imaging, computer vision, mobile computing and communications, memory, data storage, 3D semiconductor interconnect and packaging.

“We invent smart sight and sound technologies that enhance and help to transform the human connected experience.”

On February 8, 2016 Tessera’s shares were $26.57. They reached $44.74 on December 12, and excellent year by any standard, but closed flat at $44.65 on February 22. Since then its shares are down by $9 or about 20%.

On Yahoo! Finance, TSRA, the old stock symbol, shows the price of shares at the close of the session on February 22. A Google search of TSRA takes you to the new stock symbol for the company, XPER, which shows an end of Friday price of $35.10.

Image source: HDradio.com; zacks.com

IP CloseUp visits were up 81% in 2016, breaking previous record

It was the second record-breaking year in a row for IP CloseUp readership, with 43,946 visits in 2016, an 81% increase from 24,273 in 2015. The previous record increase was 31% in 2015, up from 2014.

The most popular51yeitvgpal post was “Kearns’ son still fuming over wiper blade suit,” with 21,652 views. Other popular posts included “For Samsung charity begins at home, Marshall, TX,” coming in with 5,464.

The Kearns article, detailing his 12-year patent suit with Ford and other auto companies, has generated 31,081 hits since it was originally posted in 2011.

Renewed interest in the Kearns biopic detailing the inventor’s patent suit, “Flash of Genius,” starring Greg Kinnear and Alan Alda, likely stimulated interest in the topic, as well as new obstacles to patent licensing.

 

Image source: amazon.com; hippajournal.com

 

Trump Jr.’s op-ed reveals a solid understanding of patent licensing

Donald J. Trump, Jr.’s editorial in the The Daily Caller in 2012, a conservative leaning publication that generates more than 16 million monthly visits, indicates that he has had significant experience with patents and disputes, and has a good understanding of the difference between legitimate IP holders and those attempting to game the system.

In Defending Innovatdonald-trump-jr-2ion in America,” young Mr. Trump berates tech companies that infringe software patents.

“What’s lost in the rush is that many of the software breakthroughs that underpin these apps were created years before the boom, when only a handful of companies could see the code’s revolutionary potential.

“Now, bigger companies are scrambling to catch up, and in their anxiousness they are missing or ignoring the origins of the fundamental components that make their apps possible. The violations can quickly spiral out of control, as companies race to copy each other without realizing that their competitor’s app is itself derived from software created by an original patent holder.

“Such runaway proliferation makes it even harder for small patent holders to keep their grip on the rights and returns they deserve.”

Not all Licensers are Trolls

There is a bit of confusion early in the piece as the young Mr. Trump attempts to separate patent abusers from businesses that wish to license truly innovative inventions.

Not everyone agrees that the company in question, MacroSolve, has the patent quality it claims to. TechCruch wrote that in 2014 in the company’s suit against self-described troll-killer Newegg, the company was forced to “fold like a cheap suit.”

Kudos for Recognizing

Kudos to the Donald Jr. for recognizing (in 2012) the difference between IP bulogo_200siness models and between good patents and bad – even if the system frequently does not.

In an article in The American Lawyer on December 13 it reported that “Peter Harter, a consultant and lobbyist on IP issues with The Farrington Group, has noted that Donald Trump Jr. and Trump’s national security adviser, Michael Flynn, have held positions with IP enforcement company Drone Aviation Holding Corp., formerly known as MacroSolve Inc.”

Drone Aviation Holding Corp. (DRNE) trades on the Other OTC exchange. Its website says that the company develops tethered drones and focuses on global agencies and organizations in the commercial, military, research and law enforcement sectors. Customers include the US Army, US Marines, US Navy, US EPA, NREL, Kingdom of Saudi Arabia, Ecuadorian Air Force, many US research universities and US law enforcement agencies.

DAHC is based is Jacksonville, FL. It’s website can be found here.

Image source: redchip.com; businessinsider.com

New venture boosts leading medical researchers & their IP rights

A unique public-private partnership provides medical research centers and the patents they generate with a more efficient and rewarding path toward commercialization.

Bridge Medicines is a drug discovery company launched recently in conjunction with three of the leading non-profit medical research institutions – Memorial Sloan Kettering Cancer Center, The Rockefeller University and Weill Cornell Medicine, collectively known as Tri-I TDI. This firm makes it easier for researchers to get the non-dilutive calogopital that they need to move ahead with good ideas that would otherwise require outside funding.

The partnership includes Takeda, a Japanese Pharmaceutical company, Bay City Capital, a San Francisco-based venture capital firm, and Deerfield Management, a life science analytics organization based in New York. New businesses funded by the venture will remain in New York.

From Concept to Candidate

Bridge Medicines is a unique initiative that completes an unbroken, fully funded and professionally staffed path from concept to drug candidate, in order to help develop innovative therapeutics for the treatment of human diseases.

“The goal is to move research projects further along the development path without loosing momentum or mortgaging the future of their patents,” Kathleen Denis, Associate Vice President and director of technology transfer at Rockefeller University and a past-president of the Licensing Executives Society, told IP CloseUp. “Often, research institutions must give away all of their rights for a little early help. Bridge Medicines prevents this from happening.”

Research projects accepted into the Tri-I TDI, which was launched in 2013 and currently has about 50 projects underway, will now be able to graduate to Bridge Medicines, where they will be given financial, operational and managerial support to move from validating pre-clinical studies to human clinical trials.

Retaining IP Rights

Typically, investigators behind promising early-stage discoveries must search for a bio-pharmaceutical company to purchase or license their intellectual property, or find a funding opportunity to support additional logo-tritdiresearch. This process can be time-consuming and may shift investigators’ focus away from science and onto funding. It slows progress and in some cases even ends the development path.

“The launch of Bridge Medicines is an exciting development in New York’s biotechnology space,” said Dr. Michael Foley, Sanders Director of the Tri-I TDI. “We’re offering entrepreneurs access to support what’s next in bio-pharmaceuticals. Bridge enables us to advance promising projects farther down the development pipeline, providing new therapies to patients as quickly as possible. It establishes a pathway from idea to proof of human concept with little more than a five-page application summary.”

For the Bridge Medicines announcement, go here

For more information on Bridge Medicines, go here.

For background on Tri-I TDI research partnership, go here.

Saving Time & Lives

Because Bridge Medicines projects are funded as a group, even some riskier, but potentially transformational, ideas can obtain financial support.

Participants say the arrangement could shave-off a decade or more from the typical process of going from a promising discovery to medical use.

Image source: bridgemedicines.com; tritdi.org

EFF’s narrow position on university tech transfer is “wildly misguided”

The Electronic Frontier Foundation (EFF) is attempting to paint a scarlet letter on universities with public funding who benefit from sharing discoveries with those best-equipped to monetize them.

The organization’s suggested sanctions for those schools that out-license research has been described as “preposterous,” and its condemnation of licensing specialists “wildly misguided.”

This is according to Richard Epstein, a highly respected professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School, in a recent Forbes piece.

Epstein say that the EFF equates all non-practicing entities (NPEs) with so-called patent “trolls” looking to game the system. In fact, a relatively small percentage of NPE suits are filed by those “black hat” businesses with a18063d135cfa169c2f96cce4d167ccdquestionable patents seeking a nuisance settlement.

Recently, the Electronic Frontier Foundation published an extraordinary request to research universities as part of its “Reclaim Invention” campaign: please stop putting your patents into the hands of insidious patent trolls.

EFF, writes Epstein, seeks to put teeth in its proposals by asking state legislatures to enact statutes “to bar state-funded universities from transferring patents to patent-assertion entities, broadly defined and branded as trolls”.  It proposes that these transfers be null and void if they do not meet statutory criteria, and suggest that the universities in question be punished by a forfeiture of research funding and student financial assistance.

In the eyes of the EFF, universities should exercise a higher sense of social responsibility and only sell or license their patents to those companies that “will actually do something with them.”  In its view, universities should resist the temptation to license their patents to the highest bidder. Really?

Its manifesto linking patents and NPEs with important research that is less likely to be shared for the logo_fullbenefit of the community can be found here. EFF sees patents and those who choose to share them through licensing as roadblocks, not bridges.

Blunt Condemnation

Epstein is blunt in his condemnation of the EFF’s proposal: “The first error lies in EFF’s over broad claim that equates NPEs with patent trolls; the second error is to assume that universities have some particular expertise in licensing these patents to potential end users; and the third in its wholesale condemnation of patent enforcement through litigation.”

The Forbes piece can be found here; the EFF “reclaim invention” proposal here. Both are worth reading.

The path of innovation is complex. A short-sighted position regarding who should benefit most from public research funding is self-deafting.

Image source: forbes.com; eff.org

Record 20.4% move in 3Q for Public IP company stock index (PIPX)

Public IP licensing companies (PIPCOs) are very much alive and some company shares are doing surprisingly well, despite increased obstacles to patent licensing.  

PIPX reported a 20.4% gain for the 3Q vs. just 3.3% for the S&P 500.

It was the PIPX’s best performance since the index began tracking IP licensing companies in 2011. The PIPX is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies.

3q-2016-fig-2-screenshot

“InterDigital and Tessera, comparative giants in market value, were responsible for 20% of the index move,” said Dr. Kevin Klein, Vice President and GM of Products and Licensing at VORAGO Technologies, who compiles the data. “Acacia was the biggest individual gainer, up 48.2%; WiLAN was the biggest loser, down 39.4%. ”

High Volatility

It is difficult to attribute any one specific factor to the record quarter. However, PIPX has been volatile, and somewhat counter-cyclical since its inception. The index could be seen as a hedge against S&P 500 performance. Additionally, patent licensing and sales have started to come back, and patent damages awards are being paid, although at reduced amounts.

The Patent Trial and Appeal Board has been instituting fewer Inter Partes Reviews (down to about one-third of petitions filed), but is still seen by many as a somewhat arbitrary impediment to patent licensing and enforcement.

The value of $1 invested in the S&P 500 in Q3 2011 would now be worth $1.62 while the value of the same $1 invested in the PIPX would be $0.68.

PIPX Performance by Quarter 

3q-2016-fig-3-screenshot

Added to the index is FORM Holdings (NASADQ: FH), a diversified holding company that specializes in identifying, investing in and developing companies with superior growth potential. Removed were Vringo, which was absorbed by FORM Holdings, and Unwired Planet, which was delisted on June 18.

For the full 3Q report, go here.

Image source: PIPX Public IP Index

Reporter: Patent system failed heart valve inventor

One of the biggest obstacle to inventors today may the system created to protect them. Research cardiologist Tory Norred thinks so.  

In a recent post on IP Watchdog, excerpted below, I summarize how investigative reporter Scott Eden skewers the U.S. patent system in the July-August Popular Mechanics article, “How the U.S. Patent System Got So Screwed Up.”

Eden, an award-winning reporter, whose credits include the Wall Street Journal, ESPN and TheStreet, examines the devastating impact of recent changes to the patent system by focusing on an inventor who got caught up in it.

The NPR-style article tells the story of Tory Norred, a fellow in the cardiology program at the University of Missouri cardiologist, who in 1998, came up with the idea for a collapsible prosthetic aortic valve that could be fished up through an artery with a catheter, and implanted in the hearts of patients who suffered from failing aortic valves. Unlike previous valves, Norred’s stent disperses the force needed to hold it in place against the aorta’s walls, requiring no sutures.

gallery-1466458424-pmx07116-patentoffice15In November 2002 he received U.S. Patent No. 6,482,228, “Percutaneous Aortic Valve Replacement.” Norred knew that he was onto something important, but that was not the beginning of success, it was the start of a nightmare that led to repeated frustration.

“That’s my valve!”

Norred spent the next four years talking to venture capitalists, medical products companies and even a Stanford University consultant, in an effort to finance his invention. Despite many quality meetings, no one was interested in providing capital or product development – including the product-development people he signed non-disclosure agreements with at Medtronic, Edwards Lifesciences, Johnson & Johnson, and Guidant.

“By September 2003,” writes Eden, “Norred had all but given up on his dream when he and a colleague were strolling the exhibition hall at an important cardiology congress held annually in Washington, D.C. They came upon a booth occupied by a California startup called CoreValve. With increasing alarm, Norred studied the materials at the booth. He turned to his colleague: ‘That’s my valve!'”

The rest of the story is not unfamiliar: CoreVale basically ignored him, and Norred settled into private practice. Then, in 2009, Norred saw the news online: CoreValve had sold itself to Medtronic for $775 million in cash and future payments.

In fact, collapsible prosthetic valves fished up through an artery with a catheter and implanted in the aorta are well on their way to becoming the standard method of replacing worn-out heart valves. Thee annual market has already surpassed $1.5 billion and is expected to grow.

Immediate Suspicion

The remainder of “How the U.S. Patent System Got So Screwed Up,” is devoted to the slow decline of the patents system over the past decade, and how a handful of patent “trolls” have been used as the reason to systematically dismantle much of the patent system. The same system that was the envy of the free-world and spawned many breakthrough inventions, as well as successful businesses that employ millions.

“Norred wasn’t a troll,” continues the article, “and the decision to sue did not come easily for him. His lawyer told him that the cost to litigate could exceed half a million dollars. Norred did not have half a million dollars. He considered letting it drop and moving on with his life, but in the end he couldn’t. ‘It’s gallery-1466458804-pmx07116-patentoffice17hard to give up on something you’ve worked so hard on,’ he said.”

“Whenever an independent inventor sues for infringement today, an immediate suspicion attaches to the case,” states Eden. “The anti-patent feeling is such that to assert one is to become stigmatized as a troll or, worse, a con artist or a quack. But there’s another way to look at these litigants. It could be that an inventor-plaintiff is a modern-day Bob Kearns, the Michigan engineer who spent decades fighting the global automobile manufacturing industry over the intermittent windshield wiper. They made a movie about it called Flash of Genius.

Greater Uncertainty

Inter partes reviews (IPRs) were supposed to clear up much of the uncertainty surrounding patents that are thought to be infringed, by determining which, if any, of their claims are valid in the first place. But IPRs also have had an unfortunate side effect. IPR tribunals make it easier for sophisticated defendants to kill patents held by legitimate inventors.

“The IPR isn’t an effort to figure out whether an inventor invented something,” says Ron Epstein, the former Intel attorney. “It has turned into a process where you use every i-dot and t-cross in the law to try to blow up patents… There isn’t a patent that doesn’t have some potential area of ambiguity.”

Go here to read, “How the U.S. Patent System Got So Screwed Up.”

___________ 

Popular Mechanics was first published in 1902. It is known as the monthly bible of the independent inventor. 

In 2011, two of Scott Eden’s pieces received “Best in Business” awards from the Society of American Business Editors and Writers (one for investigative reporting and one for feature writing). Eden is former staff reporter for TheStreet and Dow Jones Newswires.

Image source: popularmechanics.com

Raymond P. Niro, pioneering patent litigator, is dead at 73

Raymond Niro, a highly successful patent litigator who represented primarily inventors and other plaintiffs, passed away on August 9 at the age of 73.

It was reported that he was in ill-health and died of heart failure while vacationing in Italy.

IP Law 360 described him as a “pioneering intellectual property attorney and who often represented patent licensing companies and inventors in infringement disputes against larger corporations.”

“If I had to write my obituary – and I hope that I don’t have to do that very soon,” said Niro in May, “I’d say this is a guy who … dedicated his life to try to promote innovation and to help level the playing field for inventors who had to take on some of the big corporations.”

A chapter that Niro wrote for my 2006 book, Making Innovation Pay (Wiley), asks “Who Benefits from Patent Enforcement?” My introduction to the chapter is below. 

*****

Profile: Little Guys Like Him

“I don’t have to be liked by everyone, just respected,” Ray Niro once told a reporter.

The founder of Chicago litigation boutique Niro Scavone Haller & Niro has developed a reputation for representing independent inventors and smaller companies in patent lawsuits in which he has an equity stake. To his adversaries, he is often painted as a predator or “troll,” or, at least, representing them; to his clients, he is a white knight.

Niro is praised for giving independent inventors and small companies a voice and for helping them to level the playing field. In the high-stakes poker game that is called patent litigation, spending $10 million or more on a dispute that goes to trial is not uncommon. Needless to say, Niro, whose firm foots the bill for his time and costs, is selective about the cases he is willing to take on contingency.

His team conducts extensive due diligence, which he discusses in the following chapter. He accepts fewer than 20% of the cases his firm reviews. By any standard, Niro’s track record is impressive: more than $500 Niro_Raymondmillion won in jury and bench trials and in settlements in more than 200 patent cases over 20 years. His best-known cases include a $57 million jury verdict in a trade secret suit against a snowmobile manufacturer and its engine supplier, which was later increased to $75.5 million; a $48 million jury award against an ink manufacturer; and a $20 million patent infringement award against Square D Company.

In 1997, the National Law Journal named him “one of the ten best U.S. litigators,” and in 1999 it named him “one of the ten best trial lawyers in Illinois.” Contingency wins, where he might share 40% or more of the recoveries, have made Niro a wealthy man. He lives most of the time in Boca Raton, Florida, and has a home in Aspen, Colorado, which he built with former partner, Gerald Hosier, who is best known for generating more than $1 billion in damages and royalties on behalf of inventor Jerome Lemelson, a known patent submariner until a 1996 change in the patent law to 20 years’ exclusivity from filing effectively ended the loophole. (The Lemelson-MIT Program, endowed by the Lemelson Foundation, rewards unsung inventors. MIT describes Lemelson as “one of the world’s most prolific inventors.”)

Niro loves to go to trial. At 67 years old, the admitted sports fanatic remains fighting fit and lifts weights for 45 minutes four times a week and cycles in Aspen’s 8,000-foot altitude. He owns a Falcon 10 jet and at one time owned six Ferraris, including two 360 Spiders and a 575 Maranello. He has 10 grandchildren and million, which the trial judge later increased to $20 million. Calabrese died 19 days later. “Frank was grateful for what Ray Niro did for him,” said Kathleen Calabrese, the inventor’s widow.

“Ray was the only attorney we could find [who was] willing to take the case on contingency. He worked hard and never gave up on Frank.”

But not all of Niro’s has been married to the same woman for 41 years. The son of an immigrant bricklayer from Abruzzi, Italy, Niro grew up in Pittsburgh, where he says he learned to root for the underdog and still does.

Trained as a chemical engineer, Niro is still able to connect with juries and judges. “I learned early on that as a litigator you need to tell a story that juries and judges understand,” he told me. “You can’t talk down to anyone. I get great personal satisfaction from helping people to win cases that may not otherwise have been heard.”

Frank Calabrese was an underdog. A Waynesboro, Pennsylvania inventor, he claimed his invention, a patented data relay system, was stolen by Square D in the 1980s. He sued when he discovered that the company had been marketing a similar system and refused to pay him for it. In the four years it took for the case to go to trial, Calabrese developed colon cancer.

“Towards the end of the trial,” says Niro, “Frank, who was dying, told me ‘the money doesn’t matter. I want to be vindicated.’” And vindicated he was on January 26, 2000, when a jury awarded Calabrese $13.2  clients are defenseless little guys. Some are investors, like publicly traded Acacia Technology (NASDAQ: ACTG), which buys patents and asserts them because they understand some companies’ aversion to risk and low tolerance for the costs associated with complex patent litigation. To that Niro responds that while he prefers to work directly with inventors and small companies, middlemen can benefit the system and have the right to exist.

Niro’s chapter, “Who Benefits from Patent Enforcement?” discusses the importance of asserting patent rights not only for the less resourceful plaintiff but for society as a whole and for innovation. “When it comes to using patents for business advantage,” concludes the bearded litigator, “the little guy is not the one who is gaming the system, although many defendants would like you to think so.”

*****

Photo caption from book: It’s the high life for litigator, Ray Niro, who tools around in his Ferrari near Independence Pass (elevation 12,095 feet), not far from his Aspen home.

Those wishing to read Raymond Niro’s chapter in Making Innovation Pay can order here.

Image source: legalexecutiveinstitute.com

Shares of patent licensing cos were off in 2Q after a torrid start to year

After a record-breaking first quarter, public IP company shares (PIPCOs) under-performed most stocks versus the S&P 500 index in the second quarter.

Following a five-year leading return of 13.1%, vs. 0.8% for the S&P 500, the PIPX IP Sector Index of 13 patent licensing stocks fell in the second quarter -4.4% vs. a 1.9% gain the broader market index.

Bucking the trend was Marathon Patent Group (MARA), which was up 37.7% on settlement activity. Despite and increase in its shares of 16.1% in the second quarter, Acacia Research (ACTG) is rumored to be exploring combining with a pre-IPO business because of the difficult environment for patent licensing.

“Acacia may acquire a pre-IPO business, allow struggling IP business to wind down, former employees say.” reports the Patent Investor.

Q2 2016 Figure 2

“The value of $1 invested in the S&P 500 in Q3 2011 would now be $1.57 while the value of the same $1 invested in the PIPX would be $0.56,” says Dr. Kevin Klein, who compiles the PIPX for IP CloseUp,”

Q1 2016 Fig 2

Unwired Planet (UPIP) was the PIPX worst performer, down 32.3%. On April 7, UPIP announced that it was divesting its patent licensing business. 

The PIPX IP Sector Index is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies. This means that the performance of larger companies like InterDigital, Rambus and Tessera have a proportionately larger impact on overall index performance than swings in smaller public company shares followed.

For the full PIPX Index report for the 2Q, go here.

Q2 2016 Figure 3

Image source: PIPX IP Sector Index

PIPCO stocks soar in a surprising first half for the second quarter

In what some patent holders are hoping will be a harbinger of things to come, publicly traded IP licensing companies are enjoying an unusually strong second quarter.

Year to date performance for some of the key players include Marathon (MARA), up 40.62% as of the close of the market on May 17. This is as the S&P 500 performance has dwindled to a mere .16% YTD.

MGT Capital Investments (MGT) is up an astounding 1,704.35%, in part because cybersecurity pioneer, John McAfee, is about to be named CEO.

“Until stock-featrecently, relentlessly negative information about patents and holders has been a challenge to patent licensing and sales activity,” one analyst observed.

“It may finally be hitting opcos and the courts that not only are there opportunities out there for amiable transactions that benefit all parties and avoid disputes, but an asymmetric market for patent transactions that depresses value is potentially very dangerous for everyone.”

Others performers were Inventergy (INTV), up 14.91%, Finjan (FNJN), ups 19.13% and WiLAN (WILN), which has risen an impressive 95.4% since January 1.

Not all PIPCOs have performed well. Stalwart RPX (RPXC) was down 17.82% and Spherix (SPEX) was down 24.56%.

Improving Conditions

The stock performance is a result of a diverse contributions, including $10 million in financing for Finjan, and $25 million settlement for Marathon from Apple.

Additionally, the courts have been ruling more favorably for patent enforcers, including increasing the likelihood of wilfulness. The Patent Trial and Appeal Board (PTAB) is showing some signs of acting more fairly, too.ipcu30-blurb2-21

Operating company patent acquisition activities have increased, too, in a sign that we may have hit a bottom and patent values will be creeping up if they have not already.

For a more complete list of PIPCOs and their recent performance, visit the IP CloseUp 30® here.

Image source: 3dprinting.com

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